Waters was leading the opening race of the weekend when his Tickford Mustang went up in flames at the start of the fifth lap.
The fire looked to originate from the engine bay.
It is the third fire of the Gen3 era and first since the pair of engine fires that sparked drama at Albert Park.
Both Nick Percat (Walkinshaw Andretti United) and James Courtney (Tickford) had cars badly damaged by fires at the Australian Grand Prix.
That led to sweeping changes to the Gen3 cars such as revised catch can venting and flame retardant coating to the outside of the wheel guards in the engine bay.
Speaking to the Fox Sports broadcast, Waters said: "I'm fine. Just pissed off, to be honest, but it is what it is.
"I got a good start and I was looking after the tyres, the car felt really good. I was going down the front straight and I had a fire in my footwell. I'm like, 'this isn't going to be good'.
"By the time I got to [turn] 1 it was all up. I just had to get out as quick as I could.
"The bonnet had a weird flap into the last corner, I just thought I hit something And it was on fire down the front straight. By the time I got to turn 1 the engine had shut off, I had a long pedal and there was fire everywhere. At that point I just had to bail, find a fire extinguisher and put the fire out."
Cam Waters' Mustang has caught fire! He was leading the race#7Motorsport #RepcoSC pic.twitter.com/xWFzLBkbrb
— 7Sport (@7Sport) June 17, 2023
